An Analysis of Industrial Infill Development Marty Busekrus, HFF Ed Harrington, CenterPoint Properties Cathy Thuringer, Trammell Crow
Marty Busekrus HFF Director with HFF focusing on the industrial capital markets throughout the Southeastern U.S. Responsible for sourcing industrial opportunities by partnering owners with potential capital sources for joint ventures, debt solutions and/or buyers. Prior to joining HFF, Busekrus was a senior associate in CBRE s Private Capital Group and focused on the dispositions of office and industrial projects throughout Southeast Florida.
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An Analysis of Industrial Infill Development Marty Busekrus, HFF Ed Harrington, CenterPoint Properties Cathy Thuringer, Trammell Crow
Ed Harrington CenterPoint Properties Joined CenterPoint Properties Trust in 1999 and currently oversees the development of logistically located facilities and industrial parks for CenterPoint Properties. Has overseen the development of new industrial business parks and manufacturing and distribution facilities. He has spent more than 18 years developing industrial commercial real estate. In addition, he worked for several years as a civil engineer with local Chicago engineering firms.
Cathy Thuringer Trammell Crow Principal with Trammell Crow Company Has comprehensive management responsibility for development projects, commencing with initial site acquisition through ultimate project disposition. Oversees all aspects of industrial developments primarily in central and southern Arizona. Project profiles range from multi-phased business park infrastructure to single and multi-story speculative and build-to-suit office and industrial facilities.
DEFINING INFILL INDUSTRIAL
Industry veterans define it as Any area that has limited sites for new development without having to tear down existing real estate. A mature industrial submarket with a total developable land inventory comprising less than 10-15% of the existing base, where land assemblages are a typical requirement and redevelopment of existing buildings is common. Submarket representing an extremely dense collection of industrial buildings with very high barriers to entry, while also characterized as being proximate to large population centers. Location that benefits from a dense surrounding population and is well positioned to major thoroughfares. Potential development sites located within a heavily populated area that is fully built out with different asset classes. Caused by restrictive zoning which pushes development out of certain areas with more open land areas.
Panelists collective definition Infill Industrial projects are new developments that are situated in built-up, established, mature infrastructure areas constrained by geographical or, political challenges whereby new supply can not be added in a reasonable timeframe to meet increases in demand. Tenants are largely focused on last mile delivery and driven by local population or employment base vs. cost
Examples of Infill & Greenfield Markets Northern New Jersey Los Angeles South Florida Chicago (O Hare submarket) Atlanta (inner loop) Inland Empire Orlando Chicago (I-55 corridor) St. Louis Atlanta (outside of 285)
WHO ARE THE TENANTS? Types of users for infill space Locational drivers for infill tenants Buildout requirements for infill versus greenfield
MAXIMIZING COVERAGE Difference in FAR between infill and greenfield Considerations and challenges for maximizing coverage Potential for two-story industrial
CAPITAL MARKETS VIEW Differences in underwriting approach for infill versus greenfield Rental rates / rental rate growth Downtime assumptions Cap rates / overall returns Portfolio diversification as it relates to: Occupancy Rental rates Liquidity Competition
QTD QTD 2000 Q1 New Jersey Existing industrial buildings (no flex) over 50,000 SF, built after 2000 Infill Markets Greenfield Markets Brunswick/Piscataway Mercer Central Bergen Monmouth Eastern Morris Morris West/I-80 Hudson Waterfront Morristown Hunterdon Ocean County Meadowlands Orange County Newark Pike County North Bergen Warren NW Frontier Rockland County Rt. 46/23/3-I Somerset Sussex County Union West Essex Long Island SF % # % Avg. Size Infill 68,290,337 80% 281 79% 243,026 Greenfield 16,911,802 20% 74 21% 228,538 Total 85,202,139 355 Northern NJ/New York Vacancy 35% 30% 25% 20% 15% 10% 5% 0% Infill Greenfield Northern NJ/New York Asking NNN Rates $12.00 $11.00 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 Infill Greenfield
QTD 2000 Q1 QTD 2000 Q1 Chicago Chicago Vacancy 30% 25% 20% Existing industrial buildings (no flex) over 50,000 SF, built after 2000 Infill Markets Greenfield Markets North Chicago Indiana North Cook Lake County NW Cook Kenosha O Hare McHenry South Chicago North Kane/I-90 Near SW Suburbs South Suburban North I-55 Joliet West Cook South I-55 North DuPage Central Kane/DuPage West Suburbs I-88 West SF % # % Avg. Size Infill 40,441,386 21% 236 30% 171,362 Greenfield 150,354,411 79% 556 70% 270,422 Total 190,795,797 792 240,904 15% 10% 5% 0% Infill Greenfield Chicago Asking NNN Rates $7.00 $6.50 $6.00 $5.50 $5.00 $4.50 $4.00 $3.50 $3.00 Infill Greenfield
QTD 2000 Q1 QTD 2000 Q1 Dallas Dallas Vacancy Existing industrial buildings (no flex) over 50,000 SF, built after 2000 Infill Markets Greenfield Markets DFW Airport East Dallas Great SW/Arlington North Ft. Worth NE Dallas South Dallas NW Dallas South Ft. Worth 5% South Stemmons 0% 35% 30% 25% 20% 15% 10% Infill Greenfield Dallas Asking NNN Rates SF % # % Avg. Size Infill 104,879,475 56% 435 62% 241,102 Greenfield 83,047,755 44% 264 38% 314,575 Total 187,927,230 699 268,852 Infill Greenfield $5.50 $5.00 $4.50 $4.00 $3.50 $3.00
QTD 2000 Q1 QTD 2000 Q1 Houston Existing industrial buildings (no flex) over 50,000 SF, built after 2000 Infill Markets Greenfield Markets CBD North Fwy/Tomball Pkwy North Outer Loop N Hardy Toll Rd. NE I-10 Woodland/Conroe NE Inner Loop NE Hwy 321 NW Inner Loop NE Hwy 90 NW Near Hwy 290/Tomball Pkwy South Inner Loop NW Hwy 6 NW Outliers West Outer Loop Southeast Corridor South Hwy 35 SW Corridor Houston Vacancy 40% 35% 30% 25% 20% 15% 10% 5% 0% Infill Greenfield Houston Asking NNN Rates $9.00 $8.00 SF % # % Avg. Size Infill 12,641,573 13% 98 15% 128,996 Greenfield 87,401,875 87% 544 85% 160,665 Total 100,043,448 642 Infill Greenfield $7.00 $6.00 $5.00 $4.00 $3.00
QTD 2000 Q1 QTD 2000 Q1 Southern CA Existing industrial buildings (no flex) over 50,000 SF, built after 2000 Infill Markets Greenfield Markets Carson/Rancho Domingz Antelope Valley Central LA Conejo Valley Commerce Area SCV/Lancaster/Palmdale Eastern SGV Inland Empire East El Segundo Gardena/110 Corridor Long Beach Lower SGV Lynwoo/Paramount Mid-Counties LA Northwest SGV SFV East SFV West Southwest SGV Torrance Upper SGV Ventura County Vernon Inland Empire West Orange County (all) SF % # % Avg. Size Infill 184,914,784 56% 959 67% 192,820 Greenfield 143,118,898 44% 466 33% 307,122 Total 328,033,682 1,425 230,199 Southern CA Vacancy Infill Southern CA Asking NNN Rates Infill Greenfield Greenfield 35% 30% 25% 20% 15% 10% 5% 0% $8.00 $7.50 $7.00 $6.50 $6.00 $5.50 $5.00 $4.50 $4.00 $3.50 $3.00
QTD 2000 Q1 QTD Phoenix Phoenix Vacancy 60% 50% Existing industrial buildings (no flex) over 50,000 SF, built after 2000 Infill Markets Greenfield Markets Central Phoenix Chandler Airport Grand Ave. Chandler Mesa Chandler N/Gilbert North Airport Deer Valley/Pinnacle Park N Black Canyon Falcon Field/Apache Jct. S Airport N of Roser Glendale S Airport S of Roser Goodyear SC N of Salt River N Glendale SC S of Salt River Pinal County Scottsdale Airpark Scottsdale/Salt River SW N of Buckeye Rd. SW S of Buckeye Road Tempe Tolleson Tempe Northwest Tempe Southwest W Phoenix SF % # % Avg. Size Infill 14,003,592 20% 120 30% 116,697 Greenfield 56,721,429 80% 278 70% 204,034 Total 70,725,021 398 177,701 40% 30% 20% 10% 0% Infill Greenfield Phoenix Asking NNN Rates $7.50 $7.00 $6.50 $6.00 $5.50 $5.00 $4.50 $4.00 $3.50 Infill Greenfield
Phoenix
QTD 2016 Q2 2015 Q4 2015 Q2 2014 Q4 2014 Q2 2013 Q4 2013 Q2 2012 Q4 2012 Q2 2011 Q4 2011 Q2 2010 Q4 2010 Q2 2009 Q4 2009 Q2 2008 Q4 2008 Q2 2007 Q4 2007 Q2 2006 Q4 2006 Q2 2005 Q4 2005 Q2 2004 Q4 2004 Q2 2003 Q4 2003 Q2 2002 Q4 2002 Q2 2001 Q4 2001 Q2 2000 Q4 2000 Q2 2000 Q1 Major Markets Combined All Infield vs. Greenfield Existing Industrial (no flex) buildings built after 2000, over 50,000 SF MAJOR MARKETS VACANCY RATES 30% 25% 20% 15% 10% 5% 0% Infill Vacancy Greenfield Vacancy
QUESTIONS?
Give Us Your Feedback for this Session! Session evaluations are available on your chair. Please take a moment at the end of this session to provide your feedback on the content and speakers. Evaluations can be handed in to a NAIOP staff member at the back of the room. Thank you!